Once More Unto The Breach: Court Reconsiders NETTV And Exclusion Clauses For Deliberate Breach

• Author: Mr John O'Connor, Yvonne Cunnane and Andreas Carney
• Profession: Matheson Ormsby Prentice

Tweet

 

FREE EXCERPT

Following the decision of the High Court of England and Wales in the NetTV case1, there was a strong presumption against the ability of an exclusion clause to exclude liability for a deliberate repudiatory breach. This could only be rebutted by very strong or clear language which would persuade a court that the parties intended the breach in question to be covered. Following this decision, there was debate as to whether it would be followed in subsequent cases given its departure from the existing position of the courts in relation to the construction of limitation and exclusion of liability provisions. However, more recently the Court in AstraZeneca UK Limited v Albemarle International Corporation and Albemarle Corporation [2011] EWHC 1574 (Comm)("AstraZeneca") criticised the NetTV decision and commented that the question of whether liability for a breach of contract, of whatever nature, was limited by an exclusion clause is a matter of construction of the clause and is without any presumption. Although the Court's comments in AstraZeneca are in line with the prevailing view expressed in pre-NetTV decisions, they are obiter and therefore not binding.2 Pending at least a determinative decision by a court in the UK, if not a decision on the matter by an Irish court, caution should therefore be exercised when drafting clauses intended to exclude liability for deliberate repudiatory breaches and it would be advisable for parties to continue to include express wording to exclude such liability where desired. Facts In 2005 Albermarle (AE) entered into an agreement to supply DIP to AstraZeneca (AZ), which AZ distilled to produce Propofol. It was a term of the agreement that should AZ wish to purchase Propofol directly, then AE would have the "first opportunity and right of first refusal" to supply it. In 2008 AZ ultimately decided to purchase Propofol directly from a third party despite the fact that, following negotiations, AE had matched their terms. AE terminated the supply agreement. AZ claimed that AE had committed a deliberate repudiatory breach of the agreement by failing to deliver two orders of DIP. AE denied the claim, and in the alternative argued that any liability it might have was limited by the exclusion clause in the agreement. This clause read: "No claims by [AZ] of any kind, whether as to the products delivered or for non-delivery of the products, or otherwise, shall be greater in amount than the purchase...